It's his first year at Penn, and Blanchard Diavua is taking on water.
The College freshman borrowed almost $6,000 to fulfill the loan portion of his financial aid package.
But the debt, he feels, is worth it.
Diavua declined a full scholarship to the University of North Carolina at Chapel Hill to pursue his interest in communications at Penn's Annenberg School.
Although Penn did not offer him a full scholarship, its aid package brought the school within reach for him and his family, Diavua said. But he is afraid he will have to take on greater debt.
His fear is not unfounded. Students may be obligated to take on larger federal loans as upperclassmen than they did as freshmen.
Part of a student's financial aid package is made up of grants, money that neither students' nor their families owe the University, and some contribution is usually made through work study and summer jobs. However, many student must also take on loans, and they are responsible for paying them off upon graduation.
Forty percent of undergraduates receive aid from Penn, and while Penn's policy is to meet full need, it meets need through more loans and less grant money than Harvard, Princeton and Yale do.
Penn President Amy Gutmann has made decreasing student debt a top priority since her arrival in the fall of 2004. But over the past few years, Penn's peers have rolled out more competitive aid programs, which they say have eased the burden on their students and swung open their gates.
Trailing the pack
In 2001, Princeton eliminated loans for all aid recipients in a move to make the school more affordable. According to Don Betterton, Princeton's director of financial aid, the no-loan policy has attracted students from a wider range of income backgrounds.
Of Princeton's 1,175-strong class of 2001, 88 came from families whose incomes were below the U.S. median income level. For the class of 2009, this number more than doubled to 196 of 1,225 students.
At Harvard, President Larry Summers announced his own plan for reform. In 2004, the school waived parental contributions from students' families with annual incomes of $40,000 or less. Harvard reported a 22% increase in low-income applicants to the class of 2009.
Summers' reforms sparked change at Yale. In response to a student rally outside the admissions office, President Richard Levin announced a Harvard-style aid program, setting the qualifying income level at $45,000.
For Diavua, any of these changes would be beneficial. Under his current financial aid package, he will graduate with more than $20,000 of debt. The average debt of U.S college graduates is $19,300.
"Right now, you don't think about it," he said, "but I could see myself junior, senior year [starting to get] worried. Not everybody is going in after college making crazy amounts of money. I'm not sure where I'm going to be salary-wise."
Dennis Yu, a Wharton senior receiving aid from Penn, shares Diavua's concern. His aid package includes loans, which have increased each year, and grants, which have been dropping. However, his family's financial situation has changed very little.
"Penn is by no means obligated to give me grant money, but a change in the grant amount? ... I would like to know why," Yu said.
These issues have not gone unheard. Gutmann identified improving aid as a central part of the Penn Compact -- the three-pronged set of goals she unveiled upon her inauguration as president.
Last spring she acted on this commitment, working to eliminate the $1000 contribution from students' summer savings. Encouraged by Gutmann, Penn trustees also voted to let students substitute outside scholarships for loans. Previously, Penn had reduced its grant award to students by the amount of the outside scholarship the student received.
But Penn's endowment -- which at $4.4 billion is small relative to Harvard, Yale, and Princeton's -- presents an obstacle to more radical change.
The price of progress
Officials hope that Penn's endowment will see a substantial boost within the next seven years, as the school embarks on a massive fundraising campaign which kicked off this fall.
While their goal is to use the new funds to reduce loans, administrators say it is too early to announce in what way or by how much.
According to Bill Schilling, Penn's director of financial aid, eliminating loans altogether would require adding $325 million to the endowment.
Any large-scale change to Penn's financial aid program depends on growth in the endowment, Shilling said, because the trustees limit the endowment dollars that can be spent on financial aid.
"Where we're different from Harvard and Yale is that they have enough endowment that their average loan and [work-study] job is less than ours," Schilling said.
Harvard's changes to its program, which eliminated contributions from low-income families, cost the school $2 million a year. This amount was taken directly out of the school's $25.9 billion endowment. To launch Princeton's no-loan initiative, trustees earmarked an additional $16 million for financial aid from the school's then-$8 billion endowment.
An additional $325 million in Penn's endowment would provide the $15 million a year needed to replace loans with grants.
John Zeller, who heads fundraising efforts for Penn, says $325 million is attainable, as Penn's previous campaign, which lasted from 1997 to 2004, raised $220 million.
But eliminating loans would most likely carry a heftier price tag.
Currently, 88% of Penn's financial aid budget is funded by operations revenue -- a large part of which is tuition. Administrators want more of the money for financial aid to come from the endowment, which they say is a firmer source of funding because it is not affected by yearly fluctuations in revenue.
However, this would require an additional $1 billion, Zeller says, and the fiscal goal for the campaign won't be announced until it goes public in fall 2007.
Starting off strong
The campaign was given a boost in November when Penn trustee George Weiss presented Gutmann with a $14 million check for financial aid. The gift, pay-up for Weiss' bet that Penn would beat Princeton at this year's homecoming game, took Gutmann by surprise. He handed her the check at an annual scholarship dinner, where he then challenged 100 donors to give $2 million each to endow scholarships.
The "real goal is to make Penn affordable," Weiss said. "We're making a huge push because this is what's right."
Weiss, who received financial aid as a Penn undergrad, has championed scholarship aid as the way to make education accessible to all students. Creating scholarships and reducing loans will help more students than eliminating contributions from low-income families, as Harvard has done, Weiss said.
Gutmann agrees.
"Income alone does not tell you the full need of a student and his or her family," she said. "There's a big difference between a family whose total income is, say, $44,000, versus a student whose parents get $44,000 from assets."
Sally Donahue, director of financial aid at Harvard, said that the school reviews each student's financial situation before making a decision on parents' contributions.
"We scrutinize the heck out of tax forms, we ... go back to families ... and ask many more questions," she said.
The initiative has helped 1,000 families, she added. Harvard's policy also lowers the contribution from families in the $40,000 to $60,000 range.
Looking ahead
No matter which route Penn embarks on in its quest to revamp financial aid, the journey will take time.
But, in the meanwhile, Gutmann's small but steady steps have already yielded results.
Last spring's changes to summer earnings and outside scholarships increased the percentage of low-income students accepting admissions offers from 61% to 72%, she says. That percentage is higher than Penn's overall yield.
For students faced with the choice between an expensive Ivy League education or a scholarship at another institution, it seems as though Penn's new policies are making a difference.
